Working together for systemic change
A fundamental shift in perspective that we are already starting to see, and expect to accelerate in the coming decade, is from viewing stewardship as about the relationship between investors and individual companies, to looking more holistically at our responsibilities for shaping the market and economy as a whole – such as climate change, ocean health, biodiversity and public health.
Implementing this practice means a sharper focus than in the past on public policy, but also widening our perspective to build relationships with other stakeholders including NGOs and academic experts. A collaborative approach between investors is key to making this a success, both to muster the resources necessary to make these changes and to present a unified voice which improves the chances of successful influence.
Investors across the world step up
Over the past decade, engagement has been almost exclusively led by developed-market investors, primarily in Europe and the US. Given the increasing introduction of responsible investment regulations, guidelines and practices, we expect to see active ownership become a much stronger feature of the local investor agenda in other markets this decade.
Decade of climate action
This decade is vital to achieving the Paris Agreement goal of limiting global warming to well below 2°C, and engagement here is evolving. Collaboration is taking place at an unprecedented scale through the Climate Action 100+ initiative, while investors are increasingly expressing their dissatisfaction with companies failing to address climate issues by voting against management resolutions.
The ‘S’ factor
The ‘S’ – social – of ESG has been historically difficult to define and quantify. But the COVID-19 pandemic has profoundly impacted society and shaken our assumptions about the way we live. It has also painfully exposed social and economic inequalities.
Against this backdrop, social issues are now among the most pressing issues for companies globally. It has also become clear that all elements of ESG are fundamentally linked and of equal importance.
This decade, we expect investors and data providers to overcome the challenges that have prevented the analysis and integration of social factors to step up their engagement, while carefully balancing interconnections with E and G issues.